Turmoil-enomics IV

Redundancy is the order of the day.

It’s already started.  In the wake of Optus announcing that is going to slash staff, the company I work for has today made five people redundant as a direct consequence of the market downturn.

This excerpt from 60 minutes:

LIZ HAYES: Recession or depression, which one are we heading for?

STEVE KEEN: Unfortunately, a depression.

LIZ HAYES: Economist Steve Keen hates to say it, but he told us so. Three years ago he predicted this economic crisis – the plunging stock market and falling house prices. His next tip? Massive unemployment.

STEVE KEEN: At least a 10-15% level of unemployment and people who think we are going to be at 5.5% at the end of the year, I think are being far too optimistic.

LIZ HAYES: That equates to hundreds of thousands of people.

STEVE KEEN: It’ll crack a million, it’ll crack a million for sure in Australia.

LIZ HAYES: That’s devastating.

STEVE KEEN: It is.

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58 Responses

  1. I think I’ve got the rants for today off my chest already.

    Let’s hope that Keen is wrong.

    I hope you fared OK reb.

    EDITOR REB: Thanks Dave55. So far I’ve escaped the firing line. But it just brings it all home that no one is safe, and that what has been predicted is beginning to quickly unfold…

  2. And should it be IV instead of IIII

    EDITOR REB: Jeezus your a pedantic lot. Fixed! (With loving thanks of course…)

  3. WARNING: MOST WILL FIND THIS VERY OFFENSIVE

    I don’t think a scandal can get any bigger – it’s an innocent fraud, but it’s fraudulent nonetheless! How do governments get away with misrepresenting CPI figures and then shift the liability to the long term detriment of debt laden tax payers and pensioners? It also explains John Howard’s passion for Work Choices.

    This revelation could not come a worse time. Michael West of the SMH writes:

    http://business.smh.com.au/business/pensioners-ripped-off-20081020-54d5.html

    “But what benefits could governments possibly hope to gain by deliberately driving the new CPI measure lower?

    They could save billions of dollars on pensions and social security, says Mark Beavan. Beavan is a ”dark hat”, a top level consultant who gets called in to advise corporations and government in critical situations, or in situations where some lateral thinking and independent analysis is required.

    The CPI is used for indexing pensions and social security payments. It is used to calculate the increase in annual funding for your local pre-school with the simple aim of maintaining its purchasing power.

    The thrust of the IMF and World Bank’s policy, however, was less about easing the burden on the disadvantaged and more about forcing governments to get their debt levels down, both current and future, says Beavan.

    A lower CPI number would reduce future government outlays on pension and other payments. Lower CPI, lower indexed pensions.

    There was no mention that the changes would come at the direct expense of the most vulnerable people in society.

    There would, moreover, be an accelerating, compounding effect over time as pension rises would be calculated on already biased lower numbers year after year. Conversely, they would deliver even greater compounding returns to government coffers over time.

    In the 1996 Boskin Report, which studied the role of the CPI in government benefit programs, it was estimated that the US Government could save $1 trillion dollars over 10 years via slower and lower increases in social security payments.”

    And what significant role has the Howard Government played. Well, it all gets back to the stella job they did at reducing government debt and shifting the burden onto the private sector – yes, you and me. As Mark Davis says: So much for the magic of markets. ”

    “Australia’s ‘age of prosperity’, as Peter Costello calls it in his memoirs, has been underwritten by the mining boom (even as manufactured exports stagnated during his tenure) and massive increases in household debt (now more than $1 trillion — about the same as the annual national output), even as the government has wound down its own debt. The national debt has in effect been privatised while, at the same time, risk has been shifted away from government and business onto the shoulders of ordinary people, in the shape of long working hours, casualisation, and the sort of uncertainty that is written in the fact that Australians take the least holidays of any western nation.”

  4. My God

    Is this the blog site of doom.

    I refuse to be that pessimistic. I know people forecast what wiull happen in an economy, but how good has Steve Keen been over his whole economic life. Thos who predict doom will get it right some of the time. Those who predict boom will get it right some of the time. Most of us who stay middle of the road get it right most of the time.

    Eg: $200 a barrel for oil by the end of 2008 only months ago now $50. Interest rates 10% by end of the year now some are saying 0% by 2010.

    Somewhere in between will be the truth and I want to swim inbetween, while also being scathing at the greed of the last 15 years.

  5. John

    You are however totally correct with the CPI it is a falsehood like so many other statistics. Averaging goods is irrelevant as most of us do not buy many of the goods in the CPI on a quarterly basis. I know I don’t buy TVs or computers every 3 months yet they reflect the CPI.

    Statisitcs and figures are a way of manipulating the truth and have been far many years.

  6. “The blog of doom?”

    You have to admit it has a nice ring to it!

    🙂

  7. We’ll be rooooned…

  8. Reb

    It does have nice ring to it.

    the bell of black plague

    BRING OUT YOUR DEAD, BRING OUT YOUR DEAD 🙂

  9. It’s not a dead economy – it’s just resting.

  10. Me thinks Steve may be a little on the extreme side of the equation, simply because he’s put a lot of effort into tracking debt. Who knows really?.

    Steve Keen’s Oz Debtwatch
    Analysing Australia’s 45 Year Obsession with Debt
    http://www.debtdeflation.com/blogs/

  11. I wouldn’t panic. It’s just the same as always. There is a bleat of a downturn and people are laid off left, right and center and in about a month all of the ‘panickin’ bosses’ will have calmed down and will want to hire everyone back again.

    This will then result in the supplementary panic of not being able to hire suitable and qualified staff with the required amount of experience eg dual tradesmen with doctorates who have heavy vehicle and helicopter licences prepared to work for 1 lamb chop and half a cabbage.

  12. Found this link about the Future Fund. Assets look O.K.

    “The value of the Future Fund shrank in the September quarter as Australia’s sovereign wealth fund was buffeted by the global financial storm.”

    At this link.

    http://business.smh.com.au/business/future-fund-dented-by-financial-storms-20081020-54hu.html

    Lets hope the ALP don’t get their grubby little paws on it.

  13. Blogocracy – Blogsite of Boom Doom

  14. I’ve been thinking: what if banks removed fees on bank accounts and started paying decent interest again. Would people start start saving thereby giving banks funds?

    Those older amongst us will remember when you could have several accounts to cover household bills. And remember Christmas club accounts?

    Those accounts were handled manually with passbooks, branches and teller staff etc and should have been more expensive to maintain.

    Last month my account fees were $13 and interest was nil. Even if I don’t have a single transaction, I will lose $8 of my balance.

    Interest on your bank savings? Probably too radical these days.

  15. Well, it looks like the problems of the NSW government are over. After the disastrous by-elections at the weekend, it looks as if NSW union supremo (hack), John Robertson will stand.

    That should do the trick. During times of freefall in union membership, mass redundancies and possible recession, it is comforting to understand that the union hacks will opt for parliamentary superannuation.

    Can’t wait for some demos in the lead up to the next election –

    WADDA WE WANT???
    MORE UNION HACKS IN PARLIAMENT!!!
    WENNA WE WANIT???
    NOW!!!!

    Repeat 200 times.

    ALP politics – the career path for those that would otherwise be unemployable.

  16. Neil

    My former boss has his grubby little hands on and is charge of the future fund. One of Mr Howards best mates and staunchest supporters who I believe bordered on trying to convince us all to vote liberal at each election. Under his rule hundreds of branches of his bank closed, 12,000 staff positions removed. Wages kept at bare minimum except for his own which increased 20 fold.

    The future fund is all our taxes mine included and I am happy if it is used to help the country, that is what FUTURE means. No good having a future fund if we go down the gurgler screaming don’t touch.

  17. Tom of Melbourne

    Yes and the Liberal party is full of lawyers, solicitors and bankers who cannot seem to get jobs elsewhere or like the certainty of snouts in the trough and guaranteed superannuation for the rest of their lives. Both parties have their types.

  18. UPDATE: another guy just made redundant. That makes six today.

  19. Sans Blog | October 20, 2008 at 3:31 pm
    I’ve been thinking: what if banks removed fees on bank accounts and started paying decent interest again. Would people start start saving thereby giving banks funds?

    Well that’s an interesting thought..

    Imagine a world where people were given money for (choke) saving thereby giving banks money to invest. Compared with banks making money due to defaults on credit cards.

    I suspect that what one would need is a LOW interest rate on credit and so banks would discover that SAVING rather than DEBT was more profitable. Must choof, my silver unicorn awaits…

  20. Shane, I agree. The conservatives are full of city/suburban solicitors and country farmers. The ALP is full of union officials.

    The difference is in the pre selection processes, and the unsavoury roll of organisations (ie unions). While I don’t endorse their policies, the party structures of the conservatives allows for more membership participation in policy and pre selection.

    In the ALP, you go nowhere unless you make plenty of deals with unions and factional warlords. It is unhealthy for what should be a broadly based participatory political party.

  21. Tom of Melbourne:

    “In the ALP, you go nowhere unless you make plenty of deals with unions and factional warlords. It is unhealthy for what should be a broadly based participatory political party”

    Conversly;

    In the Liberal party, you go nowhere unless you make plenty of sychophantic deals with the select few. It is unhealthy for what should be a broadly based participatory political party.

  22. Sharemarket is up 3.34%…!!

    Let us rejoice….

  23. Just watching Julie Bishop on PM Agenda. I know that politicians have their talking points, but will she actually answer questions instead of just repeating and repeating the same thing over and over!!!!

    And in QT today, the opposition were asking why the extra child bonus in the $10.4 billion package was not mean tested. But I thought that means testing benefits was bad. Did not they oppose the change to the Solar Panel rebate where a means test was implemented?

    And finally – on the governments plan to raise the threshold for the Medicare surcharge levy. The opposition and the industry are stating that premiums will rise because of people leaving the private funds. But why is that so, if people leave private insurance doesn’t that mean that there are less people to make claims? So why do the premiums have to rise?

    As Professor Julius Sumner Miller used to say – why is it so?

  24. Tom of Melbourne

    I agree but you need to point out both sides failings. The main thing I detest in both parties is the expectation to toe the party line and support policies even if you disagree. Politicians are elected by their constituents in different demographics all over the country and they should be able to vote according to the wishes of their electorate. These days all policies are made by the leadership and expected to be supported by all in the party. This is why I am for many more independents, this will break the union stranglehold on the ALP ( although this is declining even if you do not think so) and the business stranglehold on the Liberals ( which is just as blatently evident in the unwavering support of the liberals by all of the business associations, which is simply another name for a union). You only need look at the National Party for proof of agreeing with policies even if it destroys your electorate. except for WA where the Nationals finally had the balls to demand something for their electorates and amazingly the Liberals who refused point blank before the election were suddenly able to agree to.

  25. In the ALP, you go nowhere unless you make plenty of deals with unions and factional warlords….

    It’s lovely to meet people with an imagination Tom. It’s amazing that I ever got elected at all.

    You see, in real life it’s like this: A bunch of people come around and the kids play on the playslide and then a friend laughs and says, Hey what about you. And then hubby glares. And then you say, Well if it’s ok with hubby. And then he says, Well ok if you think that you can manage. And then you say, Well I can, but I won’t stand unless it’s ok with you. And then hubby says, Well it’s ok with me.

    And bob’s y’ur uncle, you’re a pollie.

  26. Tom,

    You’re very funny when you say “The difference is in the pre selection processes, and the unsavoury roll of organisations”…

    Have a chat to the liberal party in Cook regarding Michael Towke.

    The guy on PM agenda just said that if Turnbull thinks that Rudd is acting like a wartime PM, then that makes Turnbull Neville Chamberlain! LOL

  27. joni

    Wanting things means tested by the Liberals is amazing hypocrisy when they are the ones who refused to means test any of the many benefits thrown to the electorate by Mr Howard in vote buying frenzies. Baby Bonuses, First home Owners Grant, Family Payments etc etc

  28. And finally – the opposition is asking for detail information on the basis of the $10.4 billion plan. Didn’t the former member for Bennelong just pluck the amount for the $10 billion Murray/Darling plan out of the air?

  29. The party machines are responsible for the lack of talent of all sides of politics and we pay for the ineptitude of politicians of all colours in the three forms of governance.

    I believe that unemployment will rise in certain industries but will remain static in others…the sooner that Infrastructure Australia get cracking the better…there is a plus in all this…to produce a positive out of a negative is possible.

    I believe that the Future Fund could be better utilised in projects that are proven to be viable with a better return than what is projected by the fund management.

    For any government to touch it for any other purpose would be criminal!

  30. Infrastructure australia should have been cracking for the last 20 years. We have let your country decay just the same as the US has, with all infrastructure bursting or at breaking point or crumbling. A lack of vision by all sides of the political spectrum who instead of looking to the future listened to profit at all costs instead. Governments issued bonds before to raise capital for government works yet this was all but shut down by the previous government. It is not wrong for a government to borrow for infrastructure as the infrastructure will bring many benefits to all in the long term.

    It still amazes me how business creams that the government must run a surplus yet lower taxes yet build infrastructure. you can’t have it all ways.

  31. Now it all boils down to three words!

    Prosperity With Integrity!

    Hang in there troops!

    In the biggest reccession I remember (15% unemployed)

    I also remember (I-I-I-I…rem–e—mber…) telling my troops then, that, that meant, 85% of us were still employed!

  32. And in QT today, the opposition were asking why the extra child bonus in the $10.4 billion package was not mean tested. But I thought that means testing benefits was bad. i | October 20, 2008 at 4:29 pm

    Yes absolutely. The previous argument from the Libs was that all children are equal and so why should one child receive less than another for no other reason than their parent’s income – subtext about envy – blah….

  33. Stuntreb – no worries. I make a point of not providing commentary about the conservatives.

    As I pointed out the other day, the ALP is the party I am familiar with, and because my involvement extended over years, I always think I am entitled to provide a reasonably informed critique.

    The quality of their parliamentary representation is atrocious. It is disappointing that the talent pool is so limited. This hasn’t always been the case. I blame the affiliated unions for stuffing up membership participation.

    Shane – I fully agree. Having independents hold the balance of power usually provides better government. It does keep the factions and union power brokers under control. These days I always try to find a decent independent to vote for.

    Min – imagination? I’ve never had any. Not sure which seat you were elected to or when, but I really don’t recall parliamentary seats being doled out like that, perhaps local government and the Nimbin branch or similar? Mind you, in some of the safe Liberals seats, trying to find someone to stand for the ALP was always a challenge.

    25 or so years ago branches had control of pre selection, but this led to branch stacking.

    Call me old fashioned, but I prefer the days when community activists could win a safe seat. Now we get celebrities parachuted in or tired union hacks.

    Hooray, our worries are over, we have another tired old union hack as our MP!!

    EDITOR REB: “You’re old fashioned”

  34. Someone told me today that ING is in trouble but I can’t find a reference to this in the news yet…has anyone seen an article on this?

    Mrs scaper has all her savings there.

  35. Tom of Melbourne | October 20, 2008 at 5:08 pm the Nimbin branch or similar?

    I’ll give you a hint. I was born in Hawthorn Victoria and lived in the Dandenong Ranges foothills.

    Sorry, I’ve never been to Nimbin except for once about 17 years ago when we went for a picnic for the kids basketball fundraiser.

  36. scaper – I heard on the radio this morning that the Dutch government were to give a cash injection to ING, but I do not think that they are in trouble just yet.

    Here is a link: http://ukpress.google.com/article/ALeqM5hh8vZJ6cpvLs2nuPt4sXmy26jqDQ

  37. joni,

    Thanks for the lead…Mrs scaper is considering investing in Geodynamics seperately from my stake, as mine will be going elsewhere in the future.

  38. Ah yes, the foothills. Sherbrook, Olinda etc. The Victorian equivalent of Nimbin!

    Hawthorn? Ever a member there?

  39. ING is a reg’d bank in Oz so wouldn’t it be covered by the guarantee (we’ve got money with them too)?

  40. Shane,

    You’ve said that I’ve thought about a lot. EVERY vote in parliament should be the equivalent of a ‘conscious vote’. I realise there has to be some sort of party unity but I like the way, in countries like the US, where you can vote against party policy without penalty.

  41. Hello Tom. No I’ve never been a member of any political party.

    Nope, not a member for Hawthorn. All of our family are Collingwood supporters.

    Dream on about Sherbrook, Olinda and Monbulk being an equivalent of Nimbin and The Channon. Perhaps one might say that Ocean Shores is equivalent to Mooroolbark. Only Ocean Shores is closer to the beach…

  42. Mrs scaper just got a call from ING…I thought the worst but they were trying to sell her a life insurance policy.

    To get out now or just do it in her own time is the question.

  43. Hello scaper, my cousin’s daughter works for ING, Melbourne as an accountant. Things have been on tender hooks for the past 3 years. I think that they like to keep the workers keen.

  44. Thanks Min…it looks like Mrs scaper has to make a decision tonight.

    All my cash assets is with Bank of Queensland and I’m not concerned.

  45. 5 years ago I was working for ING Australia and was made redundant when the project I was working on was cancelled. I immediately got a contract with ING Hungary. The best part was that ING had to pay me redundancy money whilst paying me for working in Budapest.

    But I have no grudges against ING – I always enjoy working for them.

  46. TB Queensland:

    “I also remember (I-I-I-I…rem–e—mber…) telling my troops then, that, that meant, 85% of us were still employed!”

    I can see you now, waving yer walking stick in air like Mr Grace from “Are you Being Served:”

    “You’re all doing ve-ry well…!!!”

  47. The previous argument from the Libs was that all children are equal . . .

    After living through the day from hell that little gem brought a grin to my otherwise frowning gob.

    Expect a policy announcement from the libs any day now, coming to a headline near you: All Babies are again Equal.

    But read the fine-print: Indigenous Babies Excluded. A policy on Indigenous babies will be announced in the shadows of the next Federal election.

  48. Interesting…care to elaborate here or by another method???

  49. Scaper

    I was having a poke at their flip-floppiness as well as their politically staged NT intervention.

  50. Future Fund has lost $780 million so far in the September quarter.

    Good one Howard/Costello, let’s “safely” put away $63.4 billion of our money in super strong financial institutions that will never ever lose money.

    I suppose it’s a good thing that Chicago based Northern Trust who are in charge of our Future Fund for $30 million p/a will manage the Future Fund’s money from their regional headquarters in Singapore using staff in Bangalore, India. I suppose that’s better than running it from America.

  51. Adrian,

    I’ve seen this coming for months…gives me no comfort though.

    Shepherds pie on the table.

  52. Just a small aside with regard to the Future Fund – intended for fat cats and pollies perks.

    The superannuation fund my son was in during his defence force service for twelve and a half years cannot be touched – he cannot move it into another fund (he discharged over five years ago) but a condition of his service is – can’t touch his Defence Force super – until he reaches 60 (because of overseas deployment – it is usually 65). Nice, hey, serve your country but we’ll decide what to do with ya money…and we all know how good governments are with other people’s money…

  53. TB,

    Is there actually the funds there to cover the super of all???

    This monopoly game was great to play when I was a kid but in the real world it is just that…a game.

    The description, badly wounded cabal comes to mind.

  54. Future Fund has lost $780 million so far in the September quarter.
    Adrian of Nowra | October 20, 2008 at 7:49 pm

    Hay Adrian- you actually sound happy that the Future Fund has lost some money.

    Anything to make fun of Howard/Costello.

    Well at least they had a go at trying to fund the unfunded super of public servants. I have no idea of the range of Public Servants that this fund is trying to look after. But it is not just politicians. I think it for for anyone working for the Australian government.

    Perhaps someone could tell me what workers this scheme looks after???

  55. I’m not happy it lost money, I’m upset it did and I’m even more upset it’s due to lose a whole lot more. And how is the scheme going to help public servants in the long run if it loses money whilst giving $30 million a year to a foreign company?

    What is it with the right that across the vast kilometres of cables, wires and RF they believe they can perceive how the left are feeling at any one time just from a post?

  56. 52. TB Queensland | October 20, 2008 at 8:04 pm

    You forget TB I did 22 years in the Navy. I am on DFRDB which sounds like the scheme your son is on. This was a great scheme if you did 20 years, which is what it was aimed at.

    Someone in their non-wisdom in Canberra decided the military should be bought in line with the rest of the population and bought in MSBS doing away with DFRDB. MSBS lost money for its members in its early years and is probably losing money now.

    Now I want you to note that whilst the argument was the military had to be bought in line with the general population as regards super, there was no way that pollies were going to touch their even more generous scheme.

  57. OK we are very grateful for your US$700 million and the board and management of AIG had a great time whooping it up at America’s most exclusive resort after that money was announced, but you know how things are, times are tough and I’m struggling to live on less than $10 million p/a, my share portfolio is shot, most of my mansions around the world have dropped in value and my kids are due for the new model Ferrari and Merc coming onto the market, for Pete’s sake their current cars are nearly two years old now.

    So please, please, please send America into further debt, cut more health, education, infrastructure and social services and throw many more billions our way, pretty please.

    ————————————
    Bernanke announced yesterday that another bailout package is needed.

    http://news.yahoo.com/s/ap/20081020/ap_on_bi_ge/financial_meltdown_41;_ylt=A9j8eOUW7PxIjHIB_wCspph4

    http://www.masslive.com/news/index.ssf/2008/10/momentum_increases_for_new_eco.html?category=Business

  58. Sorry that should have been US$700 billion

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